We don’t need no liquidation

by , under Blog

One group of factory workers, abandoned by their owner, is running the factory themselves, Jano Charbel reports:

When their owner fled the country ahead of a jail sentence, the employees at the Economic Company for Industrial Development, faced looming unemployment and the closure of the company’s multiple textile factories. A common enough story in Egypt these days, but in this case, the workers instead embarked on a landmark labor experiment.
For nearly a year, three of the Economic Company’s textile factories in 10th of Ramadan City have essentially been running themselves. Granted the right to self-management by a September 2008 court decision, the workers are paying their own wages, handling customer orders and trying to clean up the financial mess left by the previous owner.
“Working here nowadays is sweet like honey,” said Muhammad Youssef, a 12-year veteran of the company’s textile embroidery production line. “We have more rights and benefits as workers.”
Youssef’s salary has jumped from LE 450 two years ago to LE 650 per month under the new system.
The arrangement has its difficulties, and the company may yet collapse under a massive burden of tax and utility bills, but for now it stands as a closely watched experiment for a country roiled by labor unrest.
The story began when Adel Agha, owner of the Ahmoseto Company, was sentenced to three years in prison in 2002 for bribery and evasion of customs taxes. Shortly after his release, Agha was caught up in another legal battle over bank loans, and fled the country in 2008 before being sentenced to 15 years in absentia.
Agha sought to liquidate his companies, which employed 5,000 workers, while the banks moved to sequester many of his assets. The Economic Company for Industrial Development, a subsidiary of Ahmoseto, controlled nine textile factories with more than 2,000 workers. Faced with unemployment, the workers petitioned for the right to run the factories themselves.
On September 5, 2008 a court granted the workers’ request. It was only the second time in modern Egyptian history such an experiment had been tried. Previously, a lantern factory in the 10th of Ramadan industrial zone was granted self-management after its owner, wealthy businessman and former MP Rami Lakah, fled the country in 2001.
The workers at a Lakah-owned light bulb factory managed themselves from 2001 to 2006, when Lakah’s company again assumed ownership.
Over the past year of self-management, the employees at the Economic Company for Industrial Development have established their own local union committee and raised worker wages by nearly 50 per cent, said Ibrahim Othman, treasurer of the newly established local union committee. The new management was forced to close six out of the company’s nine factories, costing 1,500 jobs. However, the other three factories continue to function, keeping more than 500 workers employed.
The newly found freedom and increased wages also come with their share of headaches.
“On the downside, however, we now have to chase after our customers and clients. We produce according to the orders we receive from each customer. Piecework is an unstable and unreliable source of income,” said Othman. “Agha’s outlets, stores and showrooms, where our products were sold, have all shut down. Previously we exported to America and Australia, now it is our clients who export our products.”
In addition, the company now has to pay millions of pounds worth of insurance fees and utility bills, plus the tens of millions of pounds worth of debt that Agha incurred from bank loans and accumulated interest. “If these huge debts were resolved then our wages and living standards would be greatly improved,” said Othman.
Youssef, the veteran employee said, “Our only problems are that the banks and utility companies are always after us with their bills and fees. They have the power to pull the plug on this whole company. Our fate rests in their hands.”
At the top of the company’s new hierarchy is the caretaker commissioner Ibrahim el-Hefny, who was originally appointed by Agha in 2006 as the company’s administrative president.
“The Ahmoseto Company has all the components necessary to operate in full capacity, to produce high quality goods and to be a successful company,” el-Hefny told Al-Masry Al-Youm. “However, textile production is an extremely capital-intensive industry and we simply don’t have the capital to do so. This is why six out of the nine factories have shut down.”
The Ministry of Manpower has paid the wages of the 1,500 workers who lost their jobs for the past seven months. However, that money, paid out of a special emergency fund, runs out this month, el-Hefny said.
Banks owed money by Agha have seized LE 52 million worth of fabric and garments belonging to Ahmoseto. The company’s new management has requested a LE 5 million loan to enable them to reopen the six closed factories and an unfreezing of their assets.
“We have received no form of assistance from the banks or from the General Union for Textile Workers. Only the Ministry of Manpower has stood by our side,” el-Hefny said.
The General Union President, Saeed el-Gohary, could not be reached for comment.
Hefny said the future of both the Ahmoseto Company and the Economic Company for Industrial Development are to be determined by the decisions of the banks and utility companies. “They might decide to tear down this entire industrial complex and to sell the machinery as well as the land on which these factories are built. But this would be such a grave loss of capital and employment opportunities,” he said. “I have recently signed checks worth LE 1.8 million for utility bills. If the Economic Company cannot cover these expenses then I may end up in prison.”